Arbitration is a quasi-judicial process. It differs from traditional forms of dispute resolution in courts. This article will provide you a step-by-step guide into the arbitration process.
Agreement to arbitrate
An arbitration agreement is usually incorporated as part of the contract as an arbitration clause. If there is no arbitration clause, parties may also conclude a separate arbitration agreement to deal with dispute arising out of other contracts.
Dispute – Initiate arbitration
Arbitration is principally based on consent, while litigation is not. Courts will always remain as one of the primary remedies for parties to resolve their disputes. Dispute can arise if both parties have agreed to go to arbitration, but one changes their mind and would like to litigate on the issue instead.
Example
Party A and B has agreed to go to arbitration. Party B latter refused to go to arbitration and applies for court proceedings in Hong Kong instead. What should Party A do?
Party A can apply to the court to stay the proceedings and insist on arbitration. According to the Arbitration Ordinance, the courts of Hong Kong will only refuse to stay the proceedings if: (a) if the defendant has submitted its first statement on the dispute to the court, (b) if the court finds the arbitration to be invalid, for reasons such as it is null and void, or it is inoperative or incapable of being performed.
Appointment of arbitrators
Parties will typically appoint a panel of arbitrators to sit in a case. Normally, parties will appoint an odd number of arbitrators so that a panel can render a definite decision. Arbitrators may be lawyers, academics, retired judges, or experts in a particular field. In the case of International Arbitration, parties also prefer to appoint arbitrators that does not share the same nationality of any of the parties.
Pre-hearing; hearing
In arbitration, sometimes parties would oppose to the jurisdiction of the panel. This arises as the consent to arbitration can be a passive one. Some arbitration agreement has been drafted in a way where consent to arbitration will be given if the precedent conditions to arbitration has been met. For example, if parties have not yielded any fruitful results from negotiation or mediation. Parties who do not want to go to arbitration would try to argue that the panel do not have jurisdiction and bifurcate the proceedings. Bifurcation will split the hearing into two parts, a pre-hearing that will hear the claims on jurisdiction and a subsequent hearing on the substantive claims should the panel found that they have jurisdiction to the claim in the pre-hearing stage.
Not all arbitration proceedings require a hearing. Some arbitration may only require an exchange of documents. This is often the case for shipping disputes. However, many cases are highly complicated, and they require expert witnesses to testify, making it necessary to have an arbitration hearing.
Award
After a hearing, the panel of arbitrators will render an award. It will state their decisions and the reasons for it. As arbitration proceedings is a private process, these awards are normally not published. The names of parties are usually censored if they are published.
Possible attempt to set aside the award
An unsatisfied party may attempt to set aside the award so that the other party may not enforce it. You may apply to set aside the award if the award is contrary to public policies of the enforcing state or that the subject matter of the award is not arbitrable.
Here are some examples where the subject matter is not arbitrable under Hong Kong Law, as the courts of Hong Kong may have exclusive jurisdiction over these matters, it is such as but not limited to the following matters:
| Subject Matter that is not arbitrable under Hong Kong Law |
| Statutory compensation proceedings |
| Winding-up orders against companies |
| Criminal Law |
| Family Law |
Note that jurisdiction and arbitrability are different concepts. It is possible for an arbitral tribunal to have jurisdiction on a subject matter and render an award. The award might then be unenforceable in another state as the subject matter of the award is not arbitrable at the first place.
Recognition and enforcement of award
There are currently 168 parties to the New York Convention. The New York Convention allows awards to be readily enforced in other jurisdictions. This is the reason why arbitration is very attractive to cross-border dispute resolution as the award is enforceable in many jurisdictions. On the other hand, the rendered judgement from litigation may not be enforceable in other jurisdictions.
Key Takeaways
- Arbitration is principally based on the consent of the parties. However, litigation in local courts may remain as a fall back remedy.
- Not all arbitration proceedings require a hearing. Some hearings may require expert witnesses to testify.
- While an award is readily enforceable in many jurisdictions around the world due to the New York Convention, parties may still apply to set aside the award on a limited number of grounds.
References
Arbitration Ordinance (Cap. 609):
https://www.elegislation.gov.hk/hk/cap609?xpid=ID_1438403521476_005
Convention on the Recognition and Enforcement of Foreign Arbitral Awards: